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December 9, 2011

Yesterday the Arkansas Supreme Court issued an opinion holding that the Arkansas legislature violated that state's constitution by imposing a cap on punitive damages.

The cap, which was enacted in 2003, limits punitive damages to the greater of $250,000 or three times compensatory damages (not to exceed $1 million). Yesterday's opinion (Bayer CropScience v. Schafer), says the cap violates a provision of the Arkansas constitution that provides: "no law shall be enacted limiting the amount to be recovered for injuries resulting in death or for injuries to persons or property." The defendant argued that the language in question only applies to compensatory damages. The court disagreed, finding that punitive damages are part of the "amount to be recovered" within the meaning of the constitutional provision.

The court went on to hold that Bayer waived its right to challenge the excessiveness of the $42 million punitive damages award, because it failed to file a separate notice of appeal from the trial court's post-trial order ruling on the excessiveness issue. Ouch. In light of the substantial compensatory damages award - - $5.9 million - - the defendant would have had a strong argument that the punitive damages couldn't exceed the compensatory damages by more than a one-to-one ratio.

By our count there are 31 states with caps on punitive damages. I guess this makes it 30.